New AT&T data plans milk data gluttons, lower costs for most

AT&T has all new, lower pricing for its smartphone data plans—as well as …

As AT&T Wireless CEO Ralph de la Vega has hinted at for months, AT&T announced this morning a major overhaul to its smartphone data plans. AT&T will now offer two-tiered data plan pricing, with a top cap set at 2GB. Though most users should save money, according to AT&T's research, users that relied on unlimited data will be paying more.

The company has also announced that a long-awaited tethering plan will for the first time be available to iPhone users, about a year after tethering functionality was enabled in last year's iPhone OS 3.0 upgrade. iPhone tethering will become a reality "this summer" with the iPhone OS 4.0 upgrade; curiously, the new pricing plans go into effect the exact same day that Steve Jobs is expected to announce the next revision of the iPhone at WWDC. Along with the new smartphone plans, AT&T is also capping iPad 3G users at 2GB per month, effectively wiping out the "amazing" pricing that Steve Jobs announced back in January after only one month of iPad 3G availability.

"To give more people the opportunity to experience the benefits [of mobile broadband], we're breaking free from the traditional 'one-size-fits-all' pricing model and making the mobile Internet more affordable to a greater number of people," said de la Vega in a statement. De la Vega and other mobile CEOs have been suggesting for a while now that "unlimited" plans weren't tenable with the growing tide of smartphones and other data devices. The good news is that these changes should offer some savings for a lot of users; the bad news is that some of the changes make AT&T's data far more expensive compared to plans from other carriers.

Tiered pricing

AT&T will now offer a lower-end data plan, called DataPlus, for $15 per month. Users on this plan get 200MB to use for one month, and those that go over will be given an additional 200MB for another $15. According to AT&T's analysis, 65 percent of its smartphone customers use less than 200MB on average. Checking around the Orbiting HQ, all but one of us with an iPhone on AT&T fall into this category.

The new high-end plan, called DataPro, gets you 2GB of data use for $25 per month. If you go over 2GB, you'll pay $10 for each 1GB increment. For example, if you use 3.5GB, you'll pay $25 + 10 + 10, or $45 for the month. AT&T is not offering an unlimited data tier at any price. The company says that 98 percent of its customers use less than 2GB of data, so among these two plans, all but the heaviest data users should theoretically save on their monthly bill...

...unless you are interested in the new smartphone tethering plan. AT&T will charge you an additional $20 to use your smartphone for wireless data use with a laptop or other device. However, tethering can only be combined with the 2GB DataPro plan, and the $20 per month charge doesn't include any extra data allowance. There are no pay-as-you-go options for tethering; It's $45 per month for 2GB total usage (with $10 per GB overage) or no tethering at all.

These pricing plans go into effect on June 7 for all new AT&T customers signing up for new contracts, and current users can switch to the new plans without a contract extension. Those that are currently on a two-year contract for a $30 per month unlimited data plan can continue to use it, and can even renew their contract and keep the same data plan as long as they continue to use the same device.

At first glance, it appears that heavy users could just stay with their old plan and keep on using up to 40 percent of the data traffic on AT&T's network. If you want tethering on your iPhone or other smartphone, however, you'll have to switch to a new plan. And once you switch, you can't go back.

To help mitigate the sting somewhat, AT&T is offering free access for all smartphone users to its network of over 20,000 branded WiFi hotspots around the country. AT&T has offered this to iPhone users for some time, so this is nothing new for them.

iPad downside

iPad WiFi + 3G users, who were sold the promise of unlimited data for $30, might be in for the biggest shock by these pricing changes. Just a month after the iPad WiFi + 3G went on sale, AT&T is pulling the $29.99 unlimited data plan and replacing it with a $25, 2GB per month plan.

Those that are currently signed up for a $29.99 unlimited plan will continue to be renewed at that rate. However, if you cancel that plan for any reason, you will not be able to sign up for it again—2GB for $25 will be your only option.

"For $25, we're providing customers with a large amount of data," AT&T spokesperson Seth Bloom told Ars. "We believe that 2GB of data on the 3G network will be plenty for most customers, especially since based on the trends we’ve seen thus far, iPad customers tend to use WiFi a lot."

Inexplicably, the company is keeping the $14.99, 250MB per month plan for the iPad. "We have a unique pricing model for iPad, as we do for other emerging devices that don’t require a contract term or commitment," explained Bloom. However, it makes the low 200MB cap on the DataPlus smartphone plan seem questionable.

To be fair, prepaid data pricing from the likes of Verizon or Virgin Mobile is quite a bit more expensive (Verizon charges $30 for one week of 3G data access with a 300MB cap), so AT&T's pricing with respect to the iPad isn't that bad in comparison. However, there are no monthly contract options, nor are there options to share that data allowance with an existing data plan. And the one-month pricing switcharoo is, we expect, going to leave a very bad taste in a lot of users' mouths.

Anti-consumer?

So far, it seems that most users could end up paying less. But not everyone thinks AT&T's new plans are a good deal for consumers.

"While AT&T asserts that its high-end 2GB cap will only impact the heaviest users, the fact is that today's heavy user is tomorrow's average user," Free Press policy counsel M. Chris Riley said in a statement. "Internet overcharging schemes like the one AT&T proposes will discourage innovative new uses and stifle healthy growth in the mobile broadband economy. It is price gouging for AT&T to charge the low-end users $15 per 200MB, and to charge $20 for tethering capability even if no additional capacity is used. This pricing system is clearly divorced from the actual underlying cost of service."

Let's consider the data plans further. The 200MB cap on the low-end DataPlus tier effectively makes the price per gigabyte $76.80. But users on that plan can only get an additional 200MB allotment for another $15; they can't opt for an additional 1GB for $10 like users of the DataPro plan.

The Data Pro plan is effectively $12.50 per gigabyte, with $10 per gigabyte for each additional gigabyte. That's far more reasonable than what AT&T is charging for the DataPlus plan, and accomplishes AT&T's goal of curbing the abnormally high use of a small percentage of users. For comparison, however, smartphone data plans from Verizon are $29.99 with a 5GB cap, making the effective price per gigabyte just $6. So while AT&T may charge you less, you're also getting far less than what the competition offers.

And comparing total monthly plan costs, Sprint offers a great deal as well. While AT&T smartphone users can have a bill as low as $54.99 with the new data options combined with the cheapest calling plan, Sprint customers can get unlimited mobile-to-mobile calling, unlimited SMS and MMS, and unlimited data for $69.99. "With the latest phones delivering capabilities never before offered on a wireless device, customers are using more data, not less," Sprint spokesperson Emmy Anderson told Ars. "With Sprint Everything Data plans, there's no need to get out a calculator to tally up prices for each feature or guess how much data you'll use in a month."

The tethering pricing is also a raw deal for consumers. US iPhone users that have been waiting for a year may gladly pay the extra $20 per month fee, even as users in other countries have been tethering for a while without issue—some for no additional charge. But that doesn't make it a good deal, even though other carriers, like Verizon, also charge an additional fee for tethering. Verizon charges just $15 additional per month, it also includes a 5GB monthly allowance. And while AT&T effectively charges 1¢ for each extra MB over the 2GB cap, Verizon only charges 5¢ per MB—and you don't have to buy extra data in 1GB chunks.

The tethering pricing seems even worse compared to Android phones, which can convert to a mini-WiFi hotspot for free using an application. Essentially, all smartphone users are effectively paying for a monthly allotment of data—why should it matter if those bits go directly to a smartphone app or to your laptop? If you ask us, it shouldn't.

Wireless broadband capacity may arguably be a somewhat scarce commodity—the FCC and wireless carriers have been arguing that more spectrum is needed to serve the needs of an increasingly wireless population in the US. AT&T's new pricing plans will definitely save money for a variety of users in the long run, and may help limit the network use of heavy users. But some users—those who need only occasional tethering, for instance—are definitely going to be paying more, and getting a lot less in return.

UPDATE: AT&T spokesperson Seth Bloom just informed us that iPhone users will have some additional tools to help keep track of data use beyond checking usage under Settings or looking it up online. Like the iPad, the iPhone will warn users when approaching data limits—at 60, 90, and 100 percent of your package allotment, and at 75 and 100 percent of your overage allotment. Other smartphone users can get text messages for these warnings, and if an e-mail address is on file, you can get e-mail warnings as well.

Furthermore, Bloom noted that you can go online and switch plans as needed, in some cases applying DataPro pricing proactively for the billing period to help you avoid overage fees. For those that need occasional high data use and/or tethering, the option is effectively there—it just requires some manual management on your part to switch plans back and forth.

190 Reader Comments

So AT&T is going back on their advertised word for iPad a whopping month after the 3G model hit shelves. That is truly majestically evil. I live in no-3G land but I thought about springing for a 3G iPad because I'm planning to move closer to civilization. So glad I got the basic model now. Apparently AT&T can't be trusted as far as you can throw their corporate headquarters.

I have an iphone, double checked my usage history for the last few months. I've been hovering ~400 megs per month, wife around 8-900, mostly due to streaming music constantly. I don't know how anyone with an iphone stays below 200 unless they strictly do emailing. On the bright side, I'll get a total of $10 per month cheaper plan out of this since I don't foresee going over 2 gigs on my phone ever

I can't believe they're charging extra for tethering. As far as I'm concerned it's a feature of the phone and if I have a data plan I should be able to use it for whatever I want through the phone whether it's connected to a laptop or not. I was surprised Rogers actually did the right thing up here in Canada by not charging extra for it.

If the data is paid for, why does AT&T care whether it is going to the iphone or to a tethered computer? It makes me think that AT&T just hates its users by making this arbitrary distinction about where the data goes and charging a premium for it.

If it wasn't for the inevitable march of technology, this would be a great deal. I'd happily jump from my unlimited to the 2GB plan, as the most data I have ever used in a month was just over 2GB, and my average use is somewhere in the neighborhood of 500MB/month (except this month, where I'm on pace for 1.5GB). But, I can remember a day when the thought of 500MB of data on my desktop was too much to consider and internet usage was measured in time, not data.

My ego hopes that most people shift to the lower usage plans and consumption, freeing up bandwidth for me. My concern for the common good and understanding that the sacrifices of today mean more sacrifices tomorrow (am I ever going to be able to take a bottle of water on a plane with me?) hopes that everybody holds to the grandfather provisions.

Also, there is an issue with the grandfather provision. Other sources are stating that the unlimited plan can be kept even after changing equipment (as long as you hold to the unlimited data), but you are stating that the same equipment must be kept when reupping - although, why would someone reup if they aren't getting a new phone?

I too have read that you can keep your unlimited plan if you switch phones...as long as you're an existing customer. 200MB of data is remarkably small; I could see that being useful for $5-$10 per month. I personally use ~450MB per month of 3G data. I might consider bumping down to the $25/month if I got rollover data along with my rollover minutes. For $5/month I don't think it's worth having a cap on my data. If I can keep my unlimited plan with the new phone I'll likely go that route.

$20 for tethering? No thanks, I'll just keep using my NetShare tethering app (got it before Apple killed it) for the occasional tethering.

At least with respect to the phone, the new tiers and rates make some degree of sense, with the exception of overage charges for those on the 200MB/mo. iPad users may end up taking it in the shorts though.

I'm actually one of those people who probably can get by with the 200MB/mo plan. I do some websurfing, Google mapping, and occasional low data apps on my phone. But I don't stream any media. Looking at the charts on ATT's site for my account, it seems that I've never gone over 200MB/mo (but pretty close a few times), even when I first got the thing. I was actually a bit surprised -- I had guessed that I would be closer to 500MB/mo or so. I'm inclined to believe that ATT's figures are correct and that the vast majority of their customers will actually save money, at least for the time being, under these new options.

But there is a good question about how long that will last. One of the reasons that I don't hit the 3G network that hard is because I'm in a city where ATT's network is slammed and overloaded. And I'm often in areas where 3G reception is questionable at best. So it's actually a bit frustrating from that standpoint: I'd probably be more inclined to use data heavy applications (I have Pandora on my iPhone, for example, but I never use it) if the network were more reliable. So long term, if they don't adjust their data caps (along with, presumably, their ability to handle higher loads), these plans could work to handicap the way in which people use their phones.

Like others though, I do most of my iPhone heavy data lifting over WiFi. That said, I'm pretty irked by the tethering charge. Even if I stuck with the "budget" plan, I see no reason why I shouldn't be able to tether for free and then pay for my data overages if I incur them. It's mainly a convenience thing: if I'm stuck at an airport, I prefer to surf the web on my computer. But there isn't always WiFi. So tethering would be great, even just for some light surfing to kill some time. There's no reason to be paying $20 a month for that privilege though.

The iPad, IMO, is the device that is getting the real short end here. Very few iPhone users are going over that 2GB cap and, in any case, those that are have been getting the benefit of what amounts to a massive subsidy from all of ATT's other customers. So it's not such a bad deal from the Phone point of view. But the iPad usage model--even though it relies on the same network--is somewhat different and is more oriented toward heavy data usage. To me, the new structure heavily undercuts the value proposition of the 3G iPad, although, again, given the state of ATT's 3G network in some cities it's difficult to envision all but a handful of iPad users really going well over the 2GB threshold.

I'm not concerned about the data cap, most of my data usage on my iPhone is on wifi at work or at home. If I'm on vacation or otherwise away from wifi and needing to use maps, stream music, etc., I might peak above 500MB/month, but my average is easily <200MB/month because I make heavy use of wifi.

I'm more peeved about the tethering charge, although at this point I've learned to live without it. If I'm not going someplace with wifi, I just make do with data on my phone itself. In fact, it's led me to packing lighter. On my last trip to Disney World, I didn't take a laptop despite the fact that the resort room had Internet access. For casual use (email, light browsing, etc.), I don't really need a keyboard+big screen.

I do plan on picking up the biggest version of whatever the newest iteration of the iPhone is later this summer. It'll be my big technology splurge for the year. I love my iPhone, but an 8GB iPhone 3G is starting to get a little long in the tooth...

If the data is paid for, why does AT&T care whether it is going to the iphone or to a tethered computer? It makes me think that AT&T just hates its users by making this arbitrary distinction about where the data goes and charging a premium for it.

Two "Reasons": 1, The pricing and profit margin, etc. is based on actual usage being somewhat less than the capped amount. As tethering can dramatically increase this usage, AT&T's margin for that amount of data, at that price point goes down. 2, They want to limit the cannibalization impact of tethering. Instead of having the customer pay monthly charges on two devices, tethering brings this down to a single charge on a single device. The tethering fee makes up for this somewhat.

I don't like the policy of charging extra for tethering at all, but that's the gist of the business case for it. Remember, the telcos are desperately trying to avoid being merely dumb pipes and this kind of business strategy helps hold off the inevitable.

Doesn't the carrier still decide whether or not they want to charge for tethering? I guess I'm not understanding what this sentence is saying...?? ?? ??

The app is there. I guess it could be a TOS violation to use it on some carriers, but how the hell are they going to know if you are browsing Ars on your phone or your laptop?

Tethering is one of those areas where the carriers are clearly just making a money grab, now that their current model of highway robbery prices for minutes and texts is crumbling. Soon it's all going to be just data, and at that point they will just be another utility provider.

Let's consider the data plans further. The 200MB cap on the low-end DataPlus tier effectively makes the price per gigabyte $76.80. But users on that plan can only get an additional 200MB allotment for another $15; they can't opt for an additional 1GB for $10 like users of the DataPro plan.

The Data Pro plan is effectively $12.50 per gigabyte, with $10 per gigabyte for each additional gigabyte. That's far more reasonable than what AT&T is charging for the DataPlus plan, and accomplishes AT&T's goal of curbing the abnormally high use of a small percentage of users..

You're forgetting the subsidy that AT&T offers on these devices. That money comes from somewhere.

Quick linear algebra suggests that the first $13.88 goes towards the subsidy and the cost per GB is $5.56.

The 3G iPad is getting completely screwed here. I don't own one currently, but I would definitely opt for the WiFi model now. Previously I would have considered the 3G model so that I would be able to subscribe/unsubscribe from the 3G Data plan as desired/needed. But with that limitation the 3G plan is not worth it at all. The iPad is all about data.

doormat wrote:

Quick linear algebra suggests that the first $13.88 goes towards the subsidy and the cost per GB is $5.56.

If, like me, you're waiting for the next version of the iPhone, but don't want to get gouged on (new & improved?!?!) data plan, consider the following.

1) Buy iPhone 3GS now, from Apple (I suspect the new iPhone will be in stores on June 7 based on signs from Apple and AT&T).2) When the new iPhone is announced, make use of Apple's 14-day return policy, get the new iPhone and put your old SIM in it. Old plan, new phone.3) There's no step 3!!!

Anyone know any AT&T policies that might prevent users from doing the above?

This is gluttony. The carrier and its most popular handset technologies companies are all seeking to encourage more and more use of the data transport. If AT&T has a problem with gluttony, then eliminate the iPad and all of the popular smartphones. Eliminate video transport and watch the consumption drop.

Apparently I'm a heavy data user. Just checked "My Verizon" and as of last night I'm at 2.2gb for the month. It would be higher if I got better reception in my cube. I'd probably be running the 96kbps streams instead of this 32kbps one for my music.

The cell phone monopolies should be forced to only charge 10$ per 2GB of bandwidth, voice should be treated as data and equates to 25MB a minute........damn rackets need the gun pointed at them for a change.....

So AT&T is going back on their advertised word for iPad a whopping month after the 3G model hit shelves. That is truly majestically evil.

I get that you're frustrated, but evil? Let's save that superlative for those that deserve it.

Unlimited data on a month by month basis for $30 was an advertised feature of the iPad. Only a month after launch, they've said oops nevermind. There's a term for that: bait and switch. I personally consider that to be an evil business practice.

This is clearly focused on the converging networks....not the data hogs. As voice revenue declines on the traditional switched network, ATT needs a model to sustain revenue for voice on the packet network.

In the short run, this is bad for the heavy users/early adopters. In the long run, this will cost everyone more. This is about long-term revenue growth for ATT, and the messaging about lower costs for most users is to keep the frogs from jumping out of the pot.

I've got an unlimited plan on Verizon, but with my Blackberry, I hardly ever use much. Maybe I need to start streaming more Pandora and watching youtube?

I guess it's more novelty for me to have it if I need it than to really use it. Most the time I'm doing anything with my phone, I'm at home, where I'll just use a computer to do the same things better.

I used to use Pandora and GPSanywhere when I ran, but I've been lazy for a little while now.

Let's consider the data plans further. The 200MB cap on the low-end DataPlus tier effectively makes the price per gigabyte $76.80. But users on that plan can only get an additional 200MB allotment for another $15; they can't opt for an additional 1GB for $10 like users of the DataPro plan.

The Data Pro plan is effectively $12.50 per gigabyte, with $10 per gigabyte for each additional gigabyte. That's far more reasonable than what AT&T is charging for the DataPlus plan, and accomplishes AT&T's goal of curbing the abnormally high use of a small percentage of users..

You're forgetting the subsidy that AT&T offers on these devices. That money comes from somewhere.

Quick linear algebra suggests that the first $13.88 goes towards the subsidy and the cost per GB is $5.56.

Wait, I thought the subsidy was supposed to be covered by your monthly phone rate, not the data plan. Oh, but that can't be right, because after a two-year contract, my rate doesn't go down by the amount of the subsidy. And what was the total amount of that subsidy anyway? Isn't that covered by the ETF? Except, of course, that with the prorating of the ETF, I still owe $120 or so after 23 of 24 months, so that's not clear either.

Basically, what I'm saying is that you're trying to apply logic to the pricing, and you can't do that. If $13.88 goes towards my subsidy, does my cost drop by $13.88 after I've paid off the phone? No, of course no. Beyond the most basic breakdown, i.e. what the article did in determining the cost per GB, the only "math" you can do is determine that the cost is ridiculous, and largely a consumer-unfriendly cash grab.

Thank you, you guys are the first to print some common sense (even if it is a ways down)

"'While AT&T asserts that its high-end 2GB cap will only impact the heaviest users, the fact is that today's heavy user is tomorrow's average user,' Free Press policy counsel M. Chris Riley said in a statement."

AT&T knows the iPhone/iPad are going to use more data in the future. They should also know that the new iPhone OS4 will have multitasking which means more concurrent apps and more data. AT&T is positioning themselves to gouge their next generation of customers. This can only last as long as they have the iPhone exclusively or until Verizon makes the same anti-consumer move.